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Unit 6 – The Free Market & The Role of Government
Day 1 – Basic Economics
 Essential Question, Conceptual Lenses
 Arctic Survival (Round 1 & 2)
 Basic Economic Vocabulary
Day 2 – Basic Economics
 Arctic Survival Notes
 The Lorax
Day 3 – Economic Systems – US Mixed Market Economy
 Types of Economic Systems
 US Economic System
Day 4 – Supply & Demand
 Law of Demand
 Law of Supply
Day 5 – Market Price & Changes in Supply/Demand
 Market Price
 Changes in Supply & Demand
Day 6 – Types of Business & Competition
 Business Organizations
 Types of Competition
Day 7 – American Labor Force
 Types of Workers
 Labor Unions
Day 8 – Business Cycle/Economic Indicators
 Business Cycle
 Economic Indicators
Day 9 – Monetary Policy
 Federal Reserve
Day 10 – Monetary Policy – Fiscal Policy
 Finish Monetary Policy
 Fiscal Policy (Federal Government)
Day 11 – Fiscal Policy
 Fiscal Policy (State & Local Government)
 Notebook Check & Test Review
Day 12 – Test Review & Test
 Review Questions
 Review Game
 Test
UNIT 6 – The Free Market & The Role of Government
Day 1 & 2 - BASIC ECONOMIC CONCEPTS
Unit Essential Question
 Why are individual choice and competition important in a free market
economy?
Conceptual Lenses
 Competition
 Choices
Basic Economics
Essential Question
How does scarcity affect decision making of businesses, individuals, and
countries?
Define the Following (pgs. 499-509)
 Economics
 Microeconomics
 Macroeconomics
 Economic System
 Need
 Want
 Scarcity
 Trade-Off
 Opportunity Cost
 4 Factors of Production
 3 Basic Economic Questions
Lorax by Dr. Seuss
1) How was the concept of scarcity illustrated in the video?
2) What did the THNEED represent? (Good or Service)
3) Identify examples of each of the four factors of production in the video:

Natural – Human – Capital – Entrepreneur -
4) How was productivity increased by…

Technology, Division of Labor
5) How were each of the (3) Basic Economic questions answered?

What? - How? - For Whom?
6) How did the video illustrate interdependence?
Day 3 - THE AMERICAN ECONOMIC SYSTEM
Essential Question
Why may a country choose one economic system over another?
How do economic systems deal with scarcity?
Answer the Following Questions
o Explain each of the following types of economic systems.
Traditional Economy
Command Economy
Market Economy
Mixed Economy
o The US is considered a mixed-market economy. Why?
Centrally Planned
(p.531,622)
Answer the Following
ADAM SMITH
o Who developed the principles of a market economy?
o What was the Wealth of Nations (1776)?
o What was Laissez-Faire economics?
o What was the Invisible Hand?
6 Characteristics of the US Economy. Define & Give Example
o Little Government Involvement
o Freedom of Enterprise
o Freedom of Choice
o Private Property
o Profit Incentive
o Competition
Free Market
Day 4 - SUPPLY & DEMAND
Essential Question
How do consumers and businesses react to the forces of supply and
demand?
Chapter 21, Section 1 (pgs. 569-572)
Answer the Following
o What is demand?
o What are the (3) components of affective demand?
o What is market demand?
o What does a demand schedule show?
o What is a demand curve?
o What is the Law of Demand
o What does utility mean?
o What is the law of diminishing marginal utility?
Chapter 21, Section 2 (pgs. 574-578)
Answer the Following
o What factors affect demand? (determinants of demand)
o What is demand elasticity?
o What is elastic demand?
o What is inelastic demand?
Supply & Demand (Class Activity)
1)
2)
3)
4)
5)
1)
2)
3)
4)
Lesson 1: The Law of Demand - Class Questions
How many of you would be willing to buy a doughnut at the following
prices?
(.30, .40, .50, .60, .70, .80)
How many doughnuts would be bought at the following prices? (.55, .75)
What does the demand curve tell us about the relationship between price and
demand?
What would you do if you thought the price of doughnuts was too high?
Based on your observations, what is the law of demand?
Lesson 2: The Law of Supply - Class Questions
What people are involved in supplying doughnuts?
What would you do if you thought people would pay a high price for
doughnuts?
What would you do if you thought people would only pay a small price for
doughnuts?
How many would you produce at the following prices?
(.30, .40, .50, .60, .70, .80)
5) About how many would be sold at the following prices? (.55, .75)
6) What does the supply curve tell us about the relationship between price and
supply?
7) Based on your observations, what is the law of supply?
Chapter 21, Section 3 (pgs. 581-586)
Answer the Following
o
o
o
o
o
o
o
o
What is supply?
What is the law of supply?
What is a supply schedule?
What is a supply curve?
What affects supply? (Determinants of Supply)
What is supply elasticity?
What is elastic supply?
What is inelastic supply?
Day 5 - SUPPLY AND DEMAND, MARKETS AND PRICES
Essential Question
How do consumers and businesses react to the forces of supply and
demand?
Chapter 21, Section 4 (pgs. 588-592)
Define the Following
 Equilibrium Price
 Surplus
 Shortage
 Price Controls
 Price Ceiling
 Price Floor
1)
2)
3)
4)
5)
6)
Lesson 3: Market Price, Changes in Supply & Demand
What does the point where the supply curve and the demand curve intersect
represent?
If another class began selling doughnuts in school, what effect would this
have on supply? Graph Change, Label S1
Suppose Krispy Kreme had a shortage of dough, thus our class could only
get a limited number of boxes. What effect would this have on supply?
Graph Change, Label S2
Suppose it is late May, and our class is selling doughnuts. Another class
began selling ice cream. What effect would this have on demand, and why?
Graph Change, Label D1
Suppose we were the only class at school selling snack items. What effect
would this have on demand? Graph Change, Label D2
What effect would each of these have on price?
Day 6 - TYPES OF BUSINESS & COMPETITION
Essential Question
Why is competition beneficial in a market economy?
Chapter 22, Section 1 (pgs. 601-606)
Fill in the Following Chart on Business Organizations
Sole
Proprietorship
Partnership
Corporations
Advantages
Disadvantages
Define the Following
 Charter
 Stock
 Stockholders
 Non-Profit Organization
 Cooperatives
 Franchise
 Liability (limited/unlimited)
 Life (limited/unlimited)
COMPETITION - Define the Following
 Perfect Competition
 Imperfect Competition
Monopoly
Monopolistic Competition
Oligopoly
 Merger
Horizontal
Vertical
Takeover
 Regulation (Regulatory Agencies, Anti-Trust Legislation)
 Deregulation
Day 7 - THE AMERICAN LABOR FORCE
Essential Question
Why is competition beneficial in a market economy?
Chapter 22, Section 2 (pgs. 609-613)
Define the Following
 Civilian Labor Force
 Labor Union
 Craft Union
 Industrial Union
 Local Unions
 National Unions
 AFL-CIO
Define the Following Negotiation Tactics
 Collective Bargaining
 Mediation
 Arbitration
Define the Following Labor Union Tactics
 Strike
 Boycott
 Picketing
Define the Following Management Tactics
 Injunction
 Lockout
Define each Government Action
 Right-to-Work Laws
 National Labor Relations Board
Day 8 – BUSINESS CYCLE/ECONOMIC INDICATORS
Essential Question
How do the different levels of government stimulate economic activity?
Chapter 23, Section (pgs. 638-644)
Fill in the Phases of the Business Cycle
o Expansion
o Peak
o Contraction
o Trough
o Recession
o Depression
Explain each of the Following Economic Indicators
o GDP, Real GDP
o Unemployment Rate
o Delayed Deliveries
o New Durable Good Orders
o Stock Market
o New Building Permits
o CPI – Inflation
Explain the Following about the Stock Market
o Bull Market
o Bear Market
o Dow Jones Industrial Average (DJIA)
o Standard & Poor’s 500 (S&P 500)
o New York Stock Exchange (NYSE)
o NASDAQ
Define the Following
o Inflation (Cost Push, Demand Pull)
o Fiscal Policy, Monetary Policy
Business Cycle/ Economic Indicators Chart
Objective: Analyze the effect of economic indicators on the business
cycle.
Assignment: Each student must draw the business cycle on a sheet of
8.5 x 11 piece of paper. Under each phase you must place which
economic indicators belong in each phase. Assume that economists
have made the following reports about these leading economic
indicators. Where would these indicators be placed on the business
cycle?
Put the number of the statement where it should go on the business cycle
Economic Indicators:
1) Stock prices show steady increases over the last six months.
2) Unemployment claims are up 5%.
3) Total inventories have slightly increased.
4) The # of building permits issued in the last six months have
drastically increased.
5) Manufacturing labor hours show steady increases.
6) New plants & equipment have increased sharply.
7) Delayed deliveries have drastically reduced.
8) New durable good orders have declined slightly.
9) The number of new businesses formed has sharply increased.
Day 9 – MONEY, BANKING, & MONETARY POLICY
Essential Question
How do the different levels of government stimulate economic activity?
Chapter 24, Section 1 (pgs. 657-659)
Define the Following
o Functions of Money
Medium of Exchange
Store of Value
Measure of Value
o Currency
o Commercial Banks
o Savings & Loans Associations (S&Ls)
o Credit Unions
o FDIC
Chapter 24, Section 2 (pgs. 661-665)
Explain the Following about the Federal Reserve
o Federal Reserve System
o Monetary Policy
o Loose Monetary Policy
o Tight Monetary Policy
o Tools of the Federal Reserve
Discount Rate
Reserve Requirement
Open Market Operations
Tools of the Federal Reserve
The Federal Reserve uses (3) major tools to control the nation’s money supply. These
tools are the reserve requirement, the discount rate, and open market operations.

Describe how the Fed can use each of its tools to increase the money supply.
1) Changing the Reserve Requirement –
2) Changing the Discount Rate –
3) Open-Market Operations

Imagine you are a member of the Federal Reserve Board and your staff gives
you this report on the money supply and the economy. “The consumer Price
Index continues to rise, the money supply has increased beyond target levels.
Consumers fear a return of high inflation.” Underline the appropriate words in
parentheses to show the policy you would follow.
1) The Fed should now follow a (tighter/looser) monetary policy with the
desired effect of (increasing/decreasing) the money supply.
2) Possible actions to implement the policy are (raising/lowering) reserve
requirements, (raising/lowering) the discount rate, or (selling/buying)
treasury securities on the open-market.

Now imagine that a year has passed and your staff gives you this report.
“Business activity continues to sag, unemployment is rising, and the economy
appears to be weakening. The money supply is growing at a much slower rate.”
1) The Fed should now follow a (tighter/looser) monetary policy with the
desired effect of (increasing/decreasing) the money supply.
2) Possible actions to implement the policy are (raising/lowering) reserve
requirements, (raising/lowering) the discount rate, or (selling/buying)
treasury securities on the open-market.
Day 10 & 11 – FISCAL POLICY
Essential Question
How do the different levels of government stimulate economic activity?
Fiscal Policy
Chapter 25, Section 1 (pgs. 677-680)
Answer or Define the Following
o Who prepares the federal budget?
o Who must approve the federal budget?
o Mandatory Spending & example
o Discretionary Spending & example
o Appropriations Bill
o Where does the federal government get its money?
o Progressive Tax
o Regressive Tax
o Proportional Tax
o What are the biggest expenses for the federal government?
o What are the biggest sources of revenue for the Fed Gov?
Chapter 25, Section 2 (pgs. 682-685)
Answer the Following
o What is the largest source of state and local revenue?
o What tax brings in the most money for the each government?
o What is the largest expense for each government?
o Which level is responsible for funding education?
o What is intergovernmental revenue?
o What are some major local government services?
o What are entitlement programs?
Chapter 25, Section 3 (pgs. 688-692)
Answer the Following Questions
o When the government spends more money than it collects?
o How does the federal government borrow money?
o What is the national debt?
o What is the current national debt?
o What is a balanced budget?
o What are (2) ways the government can try to reduce the debt?
o Why is it sometimes necessary for the government to go into deficit
spending?
How Income Taxes Affect the Economy
Below you will find the 2008 Federal Income Tax Brackets. This shows the
percentage of tax that single and married citizens pay the federal government on their
income. Use the table below to do this sheet, and see how taxes impact the individual
and the economy as a whole. In doing the math, each part of your income is taxed as
it applies to the tax bracket. For example a single person earning $30,000 would pay
10% on the first $8,025 which is $802.50, and 15% on the remaining $21,975 which
is $3,296, for a total of $4,098.50 in federal income tax.
Use Single Bracket to calculate Income Tax amounts.
2008 Federal Income Tax Brackets
Tax Rate
Single
Married Filing Jointly
10%
Not over $8,025
Not over $16,050
15%
$8,025-$32,550
$16,050-$65,100
25%
$32,550-$78,850
$65,100-$131,450
28%
$78,850-164,550
$131,450-$200,300
33%
$164,550-$357,700
$200,300-$357,700
35%
Over $357,700
Over $357,700
Directions: Calculate the income tax paid using the single income bracket.
1) $40,000 2) $15,000 3) $60,000 4) $300,000 –
What might happen to the US economy if people were able to keep more of their
income? Tell how each of these areas would be impacted.
1) Demand for products and services
2) Unemployment
3) Savings Accounts
Unit 6 – The Free Market & Role of Government (Test Review)
Essential Question
Why are individual choice and competition important in a free market
economy?
Multiple Choice – 20 Questions – 3 Points Each – 60 Points Total
Business Cycle
Competition
Demand and changes to Demand
Economics
Equilibrium Price
Federal Budget
Fiscal Policy changes
Free-enterprise system
Monetary Policy changes
Monopoly
Productivity
Scarcity
Strikes
Supply and changes to Supply
Surplus
Trade-off
Unemployment
Constructed Responses – Honors & Seminar – Do Both. Standard – Choose (1)
1) The United States is in a period of economic contraction, or a recession.
- Explain the type of monetary policy the Federal Reserve should use during
this period, and what effect this would have on the money supply.
- Explain a tool that the Federal Reserve has to impact the money supply and
how they would use this tool to solve a period of recession.
2) The United States is considered to be a mixed economy.
- Identify and explain the two economic systems that the United States
combines.
- For each of the two economic systems, give a specific example from the US
economy that illustrates it.
Arctic Survival Vocabulary Quiz
1) An organized system of production.
2) What are the (4) Factors of Production?
3) What are the (3) Basic Economic Questions?
4) The relationship among people that make the actions of one
necessary for the well-being of the others.
5) A worker, or group of workers, concentrates on one task to
increase productivity.
6) The ability to produce a greater quantity of goods in better and
faster ways.
7) The study of how people use their scarce resources to satisfy
their wants and needs.
8) An abundance of needs and wants and a limited means to satisfy
them.
9) What are your (3) basic needs?
10) The general term for materials used in order to survive.
Arctic Survival Vocabulary Quiz
(Word Bank)
Capital Resources
How to Produce
Clothing
Human Resources
Division of Labor
For Whom to Produce
Economic Resources
Interdependence
Economics
Natural Resources
Economic System
Productivity
Entrepreneurship
Scarcity
Food
Shelter
What to Produce
Demand & Supply Quiz
1) What is necessary for demand to exist? (3)
2) What is diminishing marginal utility?
3) What are (2) factors that affect demand?
4) What is demand elasticity?
5) What is the law of supply?
6) What are (2) factors that affect supply?
7) The point where supply & demand are equal.
8) Define a surplus using supply & demand.
9) Define a shortage using supply & demand.
10) What is a price ceiling?
Business & Labor Quiz
1) What (2) types of business organizations have unlimited liability?
2) Who grants a corporation a charter?
3) What is a labor union?
4) What is collective bargaining?
5) What is a strike?
Federal Reserve Quiz
1) Who created the Federal Reserve?
2) Who appoints members to the Federal Reserve Board of
Governors?
3) What is the purpose of the Federal Reserve?
4) What are the (3) tools of the Federal Reserve?
5) If the Fed increases the reserve requirement, what effect would
it have on the money supply? (increase/decrease)
6) When would the Fed want to do this? (recession/inflation)
7) If the Fed sells securities on the open market, what effect would
it have on the money supply? (increase/decrease)
8) When would the Fed want to do this? (recession/inflation)
9) If the Fed lowers the discount rate, what effect would it have on
the money supply? (increase/decrease)
10) When would the Fed want to do this? (recession/inflation)